Annual Report 2007 Year Ended March 31, 2007 Nissan: Enriching People’s Lives Contents Vision Nissan: Enriching People’s Lives Mission Financial Highlights 1 Nissan provides unique and innovative automotive Letter from the President and CEO 2 products and services that deliver superior measurable Executives 5 Renault-Nissan Alliance 6 values to all stakeholders* in alliance with Renault. The Nissan Way 7 *Our stakeholders include customers, shareholders, employees, dealers, suppliers, as well as the communities where we work and operate. 8 Performance This annual report presents financial results for the fiscal period Fiscal 2006 Performance 10 ending March 31, 2007. The report also provides shareholders Fiscal 2007 Outlook 12 with insights into Nissan’s management team. Through one-on- Status of Breakthroughs 14 one interviews, various members of executive management, Fiscal 2006 Financial Review 16 including President and Chief Executive Officer, Carlos Ghosn, Fiscal 2006 Share Performance 19 discuss the philosophy and direction of Nissan. 20 Regional Action Reports Japan 22 Sustainability Report North America 24 http://www.nissan-global.com/EN/ COMPANY/CSR/LIBRARY/SR/ Europe 26 General Overseas Markets 28 Annual Report http://www.nissan-global.com/EN/ IR/LIBRARY/AR/ 32 Investment for the Future Profile Technology 34 http://www.nissan-global.com/EN/ IR/LIBRARY/PROFILE/ India 38 Our Websites Corporate Information 40 Financial Section http://www.nissan-global.com/EN/COMPANY/ IR Information http://www.nissan-global.com/EN/IR/ Product Information (by Country) http://www.nissan-global.com/EN/GLOBAL/ 86 Corporate Data Product Information (Japan) http://www.nissan.co.jp/ Environmental Activities http: //www.nissan-global.com/EN/ENVIRONMENT/ Corporate Citizenship Activities http://www.nissan-global.com/EN/CITIZENSHIP/ Quality Initiatives http://www.nissan-global.com/EN/QUALITY/ This annual report contains forward-looking statements on Nissan’s Safety Activities future plans and targets, and related operating investment, product http://www.nissan-global.com/EN/SAFETY/ planning and production targets. Please note that there can be no Latest Technologies assurance that these targets and plans will actually be achieved. http://www.nissan-global.com/EN/TECHNOLOGY/ Achieving them will depend on many factors, including not only Nissan’s activities and development, but on the dynamics of the Design Activities automobile industry worldwide and the global economy. http://www.nissan-global.com/EN/DESIGN/ FINANCIAL HIGHLIGHTS Nissan Motor Co., Ltd. and Consolidated Subsidiaries Fiscal years 2006, 2005, 2004, 2003 and 2002 Millions of U.S. dollars (Note 1) Millions of yen (except per (except per share amounts and number of employees) share amounts) 2006 2005 2004 2003 2002 2006 For the years ended Mar. 31, 2007 Mar. 31, 2006 Mar. 31, 2005 Mar. 31, 2004 Mar. 31, 2003 Mar. 31, 2007 Net sales ¥10,468,583 ¥ 9,428,292 ¥8,576,277 ¥7,429,219 ¥6,828,588 $ 88,717 Operating income 776,939 871,841 861,160 824,855 737,230 6,584 Net income 460,796 518,050 512,281 503,667 495,165 3,905 Net income per share (Note 2) 112.33 126.94 125.16 122.02 117.75 0.95 Cash dividends paid (Note 3) 131,064 105,661 94,236 74,594 50,800 1,111 Net assets (Note 4) ¥ 3,876,994 ————$ 32,856 Shareholders’ equity (Note 4) — ¥ 3,087,983 ¥2,465,750 ¥2,023,994 ¥1,808,304 — Total assets 12,402,208 11,481,426 9,848,523 7,859,856 7,349,183 105,103 Net automotive interest-bearing debt (Note 5) (254,638) (372,893) (205,791) 13,603 107,952 (2,158) Employees 186,336 183,356 183,607 123,748 127,625 Notes: 1. Unless indicated otherwise, all dollar figures herein refer to U.S. currency. Yen amounts have been translated into U.S. dollars, for convenience only, at ¥118= $1, the approximate exchange rate on March 31, 2007. 2. Net income per share amounts are based on the weighted average number of shares of common stock outstanding during each year. Figures for net income per share are in exact yen and U.S. dollars. Number of shares outstanding as of March 31, 2007: 4,520,715,112. 3. Cash dividends during the full year by subsidiary companies to non-Nissan minority shareholders are not included. 4. Effective April 1, 2006, the Company adopted a new accounting standard for presentation of net assets in the balance sheet and related implementation guidance. Under the new accounting standard, net assets represent aggregate of previous shareholders' equity, share subscription rights and minority interests. 5. Net automotive interest-bearing debt is calculated by subtracting cash and cash equivalents from interest-bearing debt in the automotive automobile and eliminations segment. Negative figure represents that the ending balance of cash and cash equivalents exceeds that of interest-bearing debt. Net Sales Operating Income Net Income (Billion Yen) (Billion Yen) (Billion Yen) 10,468.6 776.9 460.8 ’02 ’03 ’04 ’05 ’06 ’02 ’03 ’04 ’05 ’06 ’02 ’03 ’04 ’05 ’06 9,428.3 871.8 518.1 8,576.3 861.2 512.3 7,429.2 824.9 503.7 6,828.6 737.2 495.2 Nissan Annual Report 2006-2007 1 LETTER FROM THE PRESIDENT AND CEO The sole purpose of a public company is to create top-line growth, profitability, future investment growing sustainable value. At Nissan, we are totally and economies of scale through the Alliance. We focused on this purpose. have made significant progress in each area as However, for the first time in eight years, we missed shown below. our performance objectives in fiscal 2006. As a result, The first driver of top-line growth will come from our we have extended the delivery period for all Nissan future product pipeline and geographical expansion. Value-Up commitments by one year. Once we complete the 28 model launches for The stock market recognized this shortfall and Nissan Value-Up this year, we will introduce over 33 our share price mirrored our performance. However, new products during the next three years. As we we believe we are well below our potential. embark on this product offensive, we are focused on “smoothing out” the product-launch cadence in order Fiscal 2006 to avoid a new-product drought, such as those we This past year, all the headwinds we anticipated experienced in 2005 and 2006. This should reduce materialized and were more severe than expected. the likelihood of profit fluctuations and increase the This happened the lowest point of our product cycle. possibility for sustainable growth. Although we successfully launched new models, Regarding geographical expansion, one of our such as the Altima and G35, they were introduced breakthroughs under Nissan-Value Up, we have late in the fiscal year and did not lead to overall successfully expanded our geographic presence in annual volume growth. And the sales decline in our emerging markets as evidenced by the recent existing models offset these successful launches. In partnership with Renault and Mahindra in India. We addition, our short-term profit potential was offset by expect significant growth in these markets. our heavy investments for the future. Infiniti, another breakthrough, has also been In order to re-boost our profitability, we have successful in accelerating its geographical implemented several measures in Japan, U.S., expansion. After its introduction in Korea in 2005 Europe, and South Africa to address various issues and Russia in 2006, Infiniti will enter the Chinese including production capacity, dealer networks, and and Ukrainian markets in 2007 and during 2008 human resources. Yet, it is important to understand extend across Western Europe. how our situation today is different from 1999, when Top-line growth must be achieved with Nissan underwent a major recovery. Today, we are profitability. Growing volumes without an appropriate fine-tuning our operations in order to boost our contribution to profit does not make good business performance. sense. Profit is also key to maximizing cash flow. In this regard, brand and product value are crucial. Progress toward long-term value creation Several third-party non-financial leading indicators Addressing our short-term issues is important, but have exhibited our improvement in brand and we also believe it is important to achieve long-term product value. profitable growth that is measurable in the context of J. D. Power and Associates APEAL Study in a solid long-term plan. the U.S. measures owner delight with the design, In our long-term planning, the priority is to content, layout and performance of their new maximize free cash flow. The key drivers will be vehicles. In the 2006 survey, Nissan and Infiniti were 2 Nissan Annual Report 2006-2007 the segment leaders in five out of nineteen categories. Nissan has three segment-leading models, more vehicles than any other brand; Murano, Titan, and Armada. The Infiniti QX56 and M ranked at the top of their respective segments. In a recent text, Consumer Reports, an influential magazine for new car buyers in the U.S., ranked our new Altima near the top, as it tied for the number- one vehicle in the family sedan segment. And in Consumer Reports’ “Ten best cars in America,” Infiniti’s G35 and M were both recognized as the top picks for safety and reliability in their respective categories. Although improvement in these indicators is not immediately reflected in our financial results, this is an engine of our profitable growth for the future. There is a direct correlation between customer satisfaction and profits. But sustaining profits means preparing for the U.S. in 2010. We will launch a Nissan Maxima future today. We are investing massively, especially powered by a clean-diesel engine co-developed by in R&D.